“Real Gold Price Still Below Record, but Just
Barely
The real gold price has not yet reached the high of about
$1,952/ounce at today’s prices seen in January 1980, but it is
very close. In addition, prices have gone “parabolic,” meaning
they have risen by an extraordinary amount in a very short period
of time. When asset prices go parabolic, they usually do not stay
at those levels very long and often see a quick reversal. Thus,
it is possible we could see a near-term pullback in gold based on
this technical pattern. However, based on the aforementioned
factors driving gold’s meteoric rise, the pullback may not be
very large and will probably not last very long before gold
prices start to rise again.

Gold Still Hasn’t Risen as Much or as Fast as NASDAQ or
Oil
In the five years prior to their respective peaks, the NASDAQ
rose 500 percent and oil rose 340 percent. Over the last five
years, gold has not seen nearly the trajectory of increase,
rising only about 200 percent. Thus, based on this metric, gold
does not yet appear to be in a bubble à la the NASDAQ in 2000 or
oil in 2008. However, the 200 percent five-year increase has
risen from 150 percent in our April report.

Gold-Oil Price Ratio Above Average, but Not
Unprecedented
While gold has soared, oil has dropped to around $84/barrel amid
growing concerns about slowing global growth. As such, the
gold-oil ratio has jumped to 22.4, well above the historical
average of 15.5 but certainly not unprecedented. Furthermore,
just because the ratio is above-average does not necessarily mean
gold is overvalued or oil is undervalued. At this time, both the
jump in gold prices and the plunge in oil prices appear to be
justified by fundamentals. This ratio may decline a bit in the
coming weeks, but we do not foresee an outright crash in gold
prices.”